Zix Corporation Announces 2012 Fourth Quarter And Year-End Results

Zix Corporation (NASDAQ: ZIXI), the leader in email encryption services, today announced financial results for the fourth quarter and full year ended Dec. 31, 2012.

Fourth Quarter 2012 Financial Highlights
  • Fourth quarter new first year orders of $2.2 million
  • Fourth quarter revenue of $11.7 million, an increase of 18.2% year-over-year, the Company’s 16th consecutive quarterly record in revenue
  • Fourth quarter GAAP net income of $0.06 per share, a decrease of $0.16 year-over-year due to changes in deferred tax valuation allowances (1)
  • Fourth quarter Non-GAAP net income of $0.05 per share, an increase of 9.8% year-over-year
  • The Company generated approximately $0.4 million in cash flow from operations, a decrease of $2.1 million year-over-year primarily due to increased R&D and sales and marketing expenditures
  • Cash and cash equivalents totaled $23.0 million, the same as the Sept. 30, 2012, ending cash balance

Full-Year 2012 Financial Highlights
  • Ending backlog of $57.7 million, an increase of 7.5% from the prior year
  • Full-Year new first year orders of $9.0 million, an increase of 27.0% from the prior year
  • Full-year revenue of $43.4 million, an increase of 13.7% year-over-year and a record high for the company
  • Full-year GAAP net income of $0.17 per share, down $0.16 year-over-year due to changes in deferred tax valuation allowances (1)
  • Full-year Non-GAAP net income of $0.18 per share, an increase of 13.6% year-over-year and a record high for the company
  • The Company generated approximately $12.5 million in cash flow from operations for the full year ended Dec. 31, 2012, a decrease of $0.7 million year-over-year primarily due to increased R&D and sales and marketing expenditures
  • Cash and cash equivalents at year-end was $23.0 million, despite $9.0 million spent on share repurchases during 2012. This $23.0 million is an increase of $2.3 million compared to the ending cash balance for 2011

“We are very pleased to report record financial results for 2012 in new first year orders, backlog, revenue and adjusted earnings per share,” said Rick Spurr, ZixCorp’s Chairman and Chief Executive Officer. “During the year, we continued to enhance our email encryption solution, maintaining our industry-leading ease of use and our position as the market leader. We also began investments in two new data protection products and expanded our resources in sales and marketing to extend our reach. These investments, and the recent unveiling of the final omnibus HIPAA rule, position ZixCorp for revenue growth as we progress through 2013.”

Fourth Quarter and Full-Year 2012 Corporate Financial Summary and Other Operational Metrics
  Q4   Q4   % or $   FY   FY   % or $
$ in Millions, except per share data   2012   2011  

Change (2)
  2012   2011  

Change (2)
Revenue (3)   $ 11.7     $ 9.9     18.2 %   $ 43.4     $ 38.1     13.7 %
GAAP Gross Profit (3)   $ 9.6     $ 8.0     19.9 %   $ 35.7     $ 30.9     15.6 %
GAAP Net Income (1)   $ 4.0     $ 15.0     (73.3 %)   $ 11.0     $ 22.6     (51.2 %)
GAAP Net Income Per Share – Diluted (1)   $ 0.06     $ 0.23     (71.5 %)   $ 0.17     $ 0.34     (47.8 %)
Non-GAAP Adjusted Gross Profit (3) (4)   $ 9.7     $ 8.1     20.0 %   $ 35.9     $ 31.0     15.7 %
Non-GAAP Adjusted Net Income (4)   $ 3.0     $ 2.9     2.7 %   $ 11.6     $ 10.9     6.2 %
Non-GAAP Adjusted Net Income Per Share – Diluted (4)   $ 0.05     $ 0.04     9.8 %   $ 0.18     $ 0.16     13.6 %
Adjusted EBITDA (4) (5)   $ 3.4     $ 3.5     (4.0 %)   $ 13.3     $ 12.7     4.9 %
Adjusted EBITDA Margin (4) (5)     28.9 %     35.5 %   (6.7pts)     30.6 %     33.2 %   (2.6pts)
Email Encryption New First Year Orders   $ 2.2     $ 1.9     16.0 %   $ 9.0     $ 7.1     27.0 %
Email Encryption Total Orders   $ 12.9     $ 11.1     16.2 %   $ 48.2     $ 42.3     14.8 %
Email Encryption Bookings Backlog (6)   $ 57.7     $ 53.7     7.5 %            

(1) GAAP Net Income for the quarters and years ended Dec. 31, 2012, and Dec. 31, 2011, include tax benefits of $2.3 million and $11.8 million, respectively, resulting from reductions to the deferred tax valuation allowance

(2) Changes reported are based on actual results, and numbers shown in the columns may reflect rounding

(3) Amounts indicated are from continuing operations

(4) A reconciliation of GAAP to Non-GAAP adjusted results is attached to this press release and is available on our investor relations Web page at http://investor.zixcorp.com

(5) Adjusted earnings before interest, taxes, depreciation and amortization

(6) Service contract commitments that represent future revenue to be recognized as the services are provided

Outlook

For the first quarter 2013, the Company forecasts revenue to be between $11.7 million and $11.9 million and fully diluted adjusted earnings per share to be $0.03. Full-year 2013 revenues are projected to be between $48 million and $50 million. Fully diluted Non-GAAP adjusted earnings per share, which are adjusted primarily for non-cash stock-based compensation and non-recurring expense items, are projected to be between $0.19 and $0.20.

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